Big Telecom tried to kill net neutrality before it was even a concept

Opinion: Millions spent on campaigns, lobbying in bid to avoid common carrier label.

The chairman of the Federal Communications Commission announced recently he would seek to reclassify broadband Internet as a common carrier service so the government could enforce net neutrality rules, something that President Obama supports. Some telecom executives and Republicans in Congress are calling this an “extreme” and “backwards” proposal, and they’re investigating the President’s role in pushing for it.

But we’ve only reached this pivotal moment in the net neutrality debate because of past efforts by corporate lobbyists and their political allies to weaken the government’s ability to protect the open Internet. Without the telecommunications industry’s massive power to design policies in its favor, the government would most likely already have the authority it needs to ensure net neutrality.

Further Reading

In the early 2000s, back when Gmail was still for Garfield fans only, policymakers were facing important questions about the nature of broadband Internet and how it should be treated by regulators. The last major telecommunications bill was passed by Congress in 1996 and since then the technology had advanced rapidly, with two different services, cable Internet and digital subscriber line (DSL), becoming widely available.

These services both operated on infrastructure that was originally built for other purposes (cable television and landline telephony, respectively), and since the 1996 bill didn’t address Internet service in a substantial way, regulators had simply applied the regulatory treatment traditionally associated with the infrastructures to the new Internet services being offered on them. That meant that cable Internet, carried over lines used to transmit television, was treated like an “information service,” while DSL, carried over copper telephone wires, was treated like a “telecommunications service.”

The distinction is critical because under the 1996 law telecommunications services— things like wireline telephone service—are regulated more heavily under Title II of the law while information services—things like television channels and websites—are more lightly regulated under the Federal Communication Commission’s ancillary authority originating in Title I. Cable systems also face cable-specific rules from Title VI, which was added to communications law in 1984.

Title II was designed by Congress in 1934 to prevent the companies that provide basic communications services from engaging in anticompetitive and discriminatory practices. It treats these services as “common carriers”—essentially private utilities that have to meet certain public benefit, openness, and non-discrimination requirements in exchange for owning and operating monopolies. At the time of its creation this applied primarily to telephone companies, but the requirements of the law are also well suited to preventing internet service providers from violating net neutrality principles.

To consumers, cable and DSL ISPs were offering nearly identical services, but because of the outdated laws they were being treated very differently by regulators. In order to achieve regulatory parity, regulators had to decide if broadband service was more like a cable television channel or more like landline telephone service. In other words, they had to choose between regulating cable Internet up to Title II or deregulating DSL Internet service down to its general Title I authority.

The Baby Bells

In 2000 the DSL industry was dominated by the four remaining companies from the breakup of the old AT&T monopoly—Verizon, BellSouth, SBC Communications, and Qwest. These companies, commonly referred to as the “Baby Bells,” still operated regional monopolies and therefore were required under the 1996 bill to allow other carriers to access their networks. Because of this requirement, a new and growing industry of startup ISPs (competitive local exchange carriers, or CLECs) had begun leasing copper-line infrastructure from the Bells and offering competing broadband service to customers on their lines.

Not surprisingly, as the Baby Bells rolled out their DSL service, they saw the cable industry’s more relaxed regulations and total lack of competition and wanted the same treatment from the government. They launched a massive lobbying effort to push the Clinton and Bush administrations, the Federal Communication Commission, and Congress to eliminate the network sharing requirement that had spawned the CLEC market and to deregulate DSL services more broadly. Between 1999 and 2002 the four companies spent a combined $95.6 million on lobbying the federal government, according to data from the Center for Responsive Politics, which would rank them above such trade group lobbying behemoths as the Chamber of Commerce and the American Medical Association in total lobbying expenditures for the years. The companies also spent millions to lobby the public directly through aggressive advertising and public relations campaigns.

Their basic strategy was to push a bargain that if DSL was reclassified and they were allowed to operate regional monopolies without having to follow common carrier rules, they would voluntarily increase their investments in infrastructure and speed up the deployment of broadband in underserved areas.

One of the Baby Bells’ closest allies in Congress at the time was Louisiana Democrat-turned-Republican Rep. Billy Tauzin, who in 2001 had become the Chairman of the Energy and Commerce Committee, which oversees telecommunications issues and the Federal Communications Commission. The four companies had given hundreds of thousands to Tauzin’s electoral campaigns over the years. In the 2000 election, Verizon was Tauzin’s largest single donor ($13,750) and SBC was his fourth largest ($10,000). In the 2002 election the Baby Bells gave more than $61,300 to Tauzin’s campaign committee and leadership PAC, making him the top congressional recipient of their political spending for that cycle. They also helped pay for a $400,000 Mardi Gras-themed fundraiser for Tauzin at the 2000 Republican National Convention. Tauzin’s son was employed at the time as a lobbyist for one of the Baby Bells, BellSouth, in Louisiana. (For more information on Tauzin’s deep relationship with the Bell companies, check out this article originally published at Interactive Weekly).

In 2001 Tauzin teamed up with Democratic Rep. John Dingell, himself a top recipient of Baby Bell largesse, to sponsor legislation that would give the companies pretty much everything they had been lobbying for. Their bill, the “Internet Deployment and Broadband Freedom Act,” known more commonly as “Tauzin-Dingell,” would exempt Verizon and the Baby Bells from having to share their networks with competitive start-up carriers as required by the 1996 bill.

The bill also proposed to add a new section to Title II of the Communications Act to broadly exempt broadband Internet, regardless of the carrier technology, from a wide swath of the regulatory powers held by the FCC and the states. “Neither the [Federal Communications] Commission, nor any State, shall have authority to regulate the rates, charges, terms, or conditions for, or entry into the provision of, any high speed data service, Internet backbone service, or Internet access service,” the bill text read in part.

Further Reading

On February 27, 2002, Tauzin’s bill was brought to the floor of the House and passed by a vote of 273-157. Both Democrats and Republicans were divided on the bill, but it still won support from a majority of both parties. More than party affiliation, campaign contributions from Verizon and the Baby Bells were a better predictor of how members would vote, a fact that suggests the companies had a powerful influence over policymakers as they debated the future of broadband regulation. According to an analysis by the Center for Responsive Politics, the representatives who voted in favor of Tauzin-Dingell received, on average, 2.9 times more money from Verizon and the Baby Bells in the form of campaign contributions in the 2002 election than did the Representatives who voted against it.

The cable industry was officially indifferent to Tauzin-Dingell, despite the fact that it benefited its chief competitor industry, because they recognized that it favored a “regulate down” approach and, if enacted, could put them in a better position for avoiding new regulations on their own services. “NCTA strongly believes that marketplace competition is the best way to foster the availability of broadband services to all Americans,” the National Cable & Telecommunications Association (NCTA) said in a statement. “Thus, we have not opposed the Tauzin-Dingell bill nor advocated that regulatory conditions be placed on broadband competitors."

Tauzin’s friend Powell

At the same time that the House was voting on the Tauzin-Dingell bill, the Federal Communications Commission was considering separately what they could do through rulemaking to achieve regulatory parity between cable and DSL. In 2000 the FCC launched a rulemaking proceeding to determine how to classify and regulate cable internet service. In 2002 they opened a similar proceeding for DSL that sought to “resolve outstanding issues regarding the classification of telephone-based broadband Internet access services and the regulatory implications of that classification.”

Beginning in 2001, the Federal Communications Commission was chaired by Michael Powell, the son of Colin Powell and a former attorney for GTE Corp., the company that would form Verizon after merging with Bell Atlantic in 2000. Powell, in many ways, owes his position on the FCC to none other than Rep. Billy Tauzin. Back in 1997, Tauzin lobbied to get Powell appointed to the commission over incumbent Rachelle Chong, who was seeking a second term. Then, in 2001, Tauzin led the charge to get President Bush to elevate Powell to the chairmanship over Pat Wood III, who, until Tauzin got involved, was widely expected to take the position. As recounted by Village Voice reporter Brendan Koerner, Tauzin “engineered” Powell’s accession to the chairmanship as one of his first Bush-era acts.

To recap: Powell, a former attorney for Verizon, was hand-picked to lead the FCC by the head of the congressional committee with oversight over the commission, Billy Tauzin, and immediately faced major decisions on the regulatory classification of the Internet, an issue that Tauzin had spent years working on and that directly impacted the bottom line of his biggest donors.

Powell seems to have received the message that Billy Tauzin and the House of Representatives sent when they voted to gut Title II as it applies to the Internet. On Feb. 14, 2002, just two weeks after the House passed the Tauzin-Dingell bill, the Powell-led FCC took an unusual step that set in motion their approach to regulatory parity for cable and DSL. The Commission leapfrogged the typical public comment period and “notice of proposed rulemaking” and issued a declaratory ruling that cable Internet was properly classified as an information service, and thus not subject to common carrier rules, including line sharing requirements and nondiscrimination protections. One month later they released a rule proposal that tentatively concluded that DSL would also be reclassified as a Title I information service. The DSL reclassification was finalized in 2005.

It’s unclear what kinds of discussions Billy Tauzin was having with Powell around the FCC’s decisions to classify broadband as a Title I information service, but watchdog groups were accusing him of “meddling” in related rulemaking proceedings at the agency around the same time. Lateraccounts of Tauzin’s involvement in health care legislation as a lobbyist for the pharmaceutical industry suggest that he can be aggressive at lobbying policymakers to bend his way.

With the FCC’s rulings, broadband Internet service was officially differentiated from dial-up Internet service for regulatory purposes and reclassified to the same category of lightly regulated information services as things like websites or apps. The Powell-led FCC had finalized nearly all of the broadband deregulation that the Baby Bells had lobbied for and that Rep. Tauzin and Baby Bell-backed representatives had endorsed, but without having to go through Congress and change the law.

These rulings led to the elimination of line-sharing requirements and decimated the CLEC industry that had been competing with the local monopolies for residential broadband customers. Years later Verizon and Comcast would use the rulings to kill the FCC’s attempts at enforcing net neutrality. In 2010, the DC Circuit Court of Appeals ruled in favor of Comcast in determining that the FCC did not have “reasonably ancillary” jurisdiction to use Title I of the Communication Act to stop Comcast from throttling peer-to-peer programs because they could not cite a statutorily mandated responsibility empowering them to do so.

In 2014 the DC Circuit cited the Title I classification of ISPs in siding with Verizon and vacating the FCC’s second attempt at promulgating net neutrality rules. “Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such,” the court stated.

Michael Powell left the FCC in 2005, but he is still one of the most powerful figures in determining Internet regulations and net neutrality rules. Powell is now the president and chief lobbyist of the NCTA, a cable industry trade group that has been the hands-down leader in the industry’s efforts to block net neutrality. Under Powell, the organization has increased its spending on lobbying year after year and it now spends more on lobbying than any other organization in the communications sector. With Powell at the helm working his connections in Congress and at the FCC, they seemed to be getting maximum bang for the buck because so-called revolving door connections make lobbying spending more effective—until current FCC Chairman and former NCTA chief Tom Wheeler announced that he would propose to reclassify broadband as Obama suggested.

Further Reading

Although it looks like as though the FCC is about to reclassify broadband as Title II, many of the same factors that led to the deregulatory rulings of the early 2000s are still in play. Members of Congress, disproportionately those who are financially supported by large cable and telecom companies, are lobbying against Title II reclassification. The broadband industry is now more consolidated than ever and the industry’s promise of infrastructure investment in exchange for deregulation has not come to pass.

The companies that provide Internet service to most Americans have not always been deregulated monopolies with the ability to create fast lanes and slow lanes on the Internet. They got there by using many of the tactics that have fueled the record levels of distrust in the U.S. government—bought politicians, corrupt legislation, and revolving-door power trading. While it’s not possible to examine the counterfactual history in which policymakers designed regulatory parity for the Internet with total independence, it should be acknowledged that the current net neutrality debate is based on past policy decisions, including the original removal of broadband from Title II, that were shaped by lobbying dollars and the raw monopoly power of America’s top telecommunications companies.

Donny Shaw is a freelance journalist covering money in politics, tech, monopoly power and the legislative process.